An Entire Country Switched to Bitcoin and Now Its Economy Is Floundering(futurism.com)
futurism.com
An Entire Country Switched to Bitcoin and Now Its Economy Is Floundering
https://futurism.com/el-salvador-bitcoin-economy
61 comments
> Claims about cheaper transaction costs with banks outside the country (primarily the US) turn out to be false
These were always obviously false. Why did anyone believe the claims?
These were always obviously false. Why did anyone believe the claims?
Crypto evangelism increasing looks like propaganda. Nonsensical ideas like "Bitcoin is a store of Energy™" get thrown around as though they're factual. It's a collective delusion, really.
Currencies are energy stores.
I assume this is just a troll or a joke. Clearly they are not.
Hello internet, I'd like to file a return
“Thanks for the exit liquidity for our increasingly technologically uncompetitive w.r.t. other cryptocurrencies asset”
- Bitcoin HODLers
You aren't exit liquidity when you hold thousands of Bitcoin for years....
Bitcoin as a currency is a scam. That is true beyond a doubt. Every promise made about Bitcoin as a currency has predictably, proven to be false (claims proven false include easy/cheap transactions, no traceability, no depreciation).
Which is why the Bitcoin industry now pushes it as an investment, which would require it to have diametrically opposed properties than as a currency.
The only question remaining is whether there is some genuine use for Bitcoin, but the original marketing of Bitcoin is indisputably false at this point.
Which is why the Bitcoin industry now pushes it as an investment, which would require it to have diametrically opposed properties than as a currency.
The only question remaining is whether there is some genuine use for Bitcoin, but the original marketing of Bitcoin is indisputably false at this point.
I would flip that. Bitcoin as an investment is a scam, one propped up by any number of stories (all of which a variation of "limited amount, but now cause number go up").
Bitcoin as a currency works even if "number don't go up".
Bitcoin as a currency works even if "number don't go up".
how is it a scam in anyway? i use bitcoin daily and I do get cheap and easy transactions
Don’t mind the negative comments below; it happens every time the crypto market takes a dive or is in a downward trend you get countless ignorant remarks from people like you did here.
Simply put, put BTC against any other asset over the past 10 years and your better off.
Simply put, put BTC against any other asset over the past 10 years and your better off.
What do you use it for daily?
>daily
>cheap
>easy
Sorry for being skeptical, could you tell us more about what you do with it?
>cheap
>easy
Sorry for being skeptical, could you tell us more about what you do with it?
Money laundering, illegal transactions?
Monero works better for those. And has cheaper tx fees.
This article is really, really poorly written.
The headline implies that the "country" (El Salvador) "switched" to Bitcoin, but this isn't what happened. They passed a law that allows BTC to be used as a legal tender, and apparently 46% of the country now has a BTC wallet[1]. As far as I can tell, USD is still accepted there (I've been to SA but not El Salvador so I don't have first hand experience, let alone recent experience given the pandemic). Also worth noting that "as of 2017, only 29 percent of Salvadorans had bank accounts."
TFA goes on to meander about on how El Salvador's bond situation is bad, is asking for an IMF loan, and the BTC price is volatile. Day that in the English language ends in "y" I suppose.
Anyway, I'm still bullish on crypto for a couple of reasons but this from the wiki about their BTC law caught my eye:
>In the early hours after the law took effect and the official launch of new technologies to deal with a major change to the national currency infrastructure, the government had to take its bitcoin e-wallet, Chivo, offline due to excessive load. The Bukele government increased server capacity and brought the e-wallet back online by mid-day.
I've wondered before about how in order for BTC to properly function ... (setting aside the inevitable and boring arguments about "is it a currency?" or "no it's a store of value!") you need to have modern and robust internet infrastructure. That really seems to be a bottleneck for adoption here that in my mind keeps BTC and other crypto gate-kept behind the physical infrastructure that exists in your country. I don't know, maybe that gets governments to invest in modernizing their networks but I'm skeptical. Suddenly if modernizing your internet infrastructure means your citizens start rejecting your sovereign currency ... that presents some, well, problems. Unless you fully embrace it, which is what Bukele seems to be doing with this experiment.
[1] https://en.wikipedia.org/wiki/Bitcoin_Law
The headline implies that the "country" (El Salvador) "switched" to Bitcoin, but this isn't what happened. They passed a law that allows BTC to be used as a legal tender, and apparently 46% of the country now has a BTC wallet[1]. As far as I can tell, USD is still accepted there (I've been to SA but not El Salvador so I don't have first hand experience, let alone recent experience given the pandemic). Also worth noting that "as of 2017, only 29 percent of Salvadorans had bank accounts."
TFA goes on to meander about on how El Salvador's bond situation is bad, is asking for an IMF loan, and the BTC price is volatile. Day that in the English language ends in "y" I suppose.
Anyway, I'm still bullish on crypto for a couple of reasons but this from the wiki about their BTC law caught my eye:
>In the early hours after the law took effect and the official launch of new technologies to deal with a major change to the national currency infrastructure, the government had to take its bitcoin e-wallet, Chivo, offline due to excessive load. The Bukele government increased server capacity and brought the e-wallet back online by mid-day.
I've wondered before about how in order for BTC to properly function ... (setting aside the inevitable and boring arguments about "is it a currency?" or "no it's a store of value!") you need to have modern and robust internet infrastructure. That really seems to be a bottleneck for adoption here that in my mind keeps BTC and other crypto gate-kept behind the physical infrastructure that exists in your country. I don't know, maybe that gets governments to invest in modernizing their networks but I'm skeptical. Suddenly if modernizing your internet infrastructure means your citizens start rejecting your sovereign currency ... that presents some, well, problems. Unless you fully embrace it, which is what Bukele seems to be doing with this experiment.
[1] https://en.wikipedia.org/wiki/Bitcoin_Law
>El Salvador has found itself in an ever-deepening sinkhole of debt, with its cringe president lobbying the International Monetary Fund for a $1.3 billion loan, according to the magazine, and shortly after the Bitcoin City announcement in November, the country’s sovereign bond dropped from 75 cents to 63 cents overnight and is now at 36 cents.
The above sentence is nearly impossible to parse, it has so many commas and clauses.
I agree that the financial decisions of the current administration of El Salvador are unwise- but saying the president of El Salvador is ‘cringe’ is so low effort it’s insulting.
The above sentence is nearly impossible to parse, it has so many commas and clauses.
I agree that the financial decisions of the current administration of El Salvador are unwise- but saying the president of El Salvador is ‘cringe’ is so low effort it’s insulting.
Sure, this use of "cringe" in the adjective position is Gen-Z (I guess) and in a way itself "cringe". But overall I found the sentence to be (while clearly a run-on) perfectly readable.
Saying the president of El Salvador is ‘cringe’ is so low effort it’s insulting.
So you're reading a would-be BuzzFeed clone site called "Futurism" and you're surprised to find your intelligence insulted?
Saying the president of El Salvador is ‘cringe’ is so low effort it’s insulting.
So you're reading a would-be BuzzFeed clone site called "Futurism" and you're surprised to find your intelligence insulted?
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>but saying the president of El Salvador is ‘cringe’ is so low effort it’s insulting
I know you mean this coming from a mental image that you (and most of us) have of a head of state.
But really, have a look at the guy and his behavior. Cringe is a perfectly apt adjective.
I know you mean this coming from a mental image that you (and most of us) have of a head of state.
But really, have a look at the guy and his behavior. Cringe is a perfectly apt adjective.
After the last two presidents America has elected, having an opinion on the heads of state of other countries seems a little bit rich. A clown, a geriatric, what's next? Clown 2? The imf is and has always been the greatest repressive force preventing development and state sovereignty. Nothing good comes from the imf ever. Especially if you're not in the west
Just because we’ve had some characters as president doesn’t mean we can’t have opinions. Only countries with a history of perfect presidents can have opinions? And by this logic, rich people shouldn’t comment on the imf, and anyone on the internet on hacker news is comparatively well off in the grand scheme.
If having a bad leader means we can’t comment on other presidents, and all countries have had rich powerful people and organizations abuse their monetary power, how is it consistent to be okay criticizing external rich and powerful organizations but not leaders?
If having a bad leader means we can’t comment on other presidents, and all countries have had rich powerful people and organizations abuse their monetary power, how is it consistent to be okay criticizing external rich and powerful organizations but not leaders?
> hacker news is comparatively well off in the grand scheme.
Get out, I was reading hacker news on one meal a day years ago.
No prejudice.
Get out, I was reading hacker news on one meal a day years ago.
No prejudice.
> Nothing good comes from the imf ever. Especially if you're not in the west
The IMF bailout and the forced economic reforms of 1991 are responsible for the decades of growth, development and poverty alleviation that India experienced.
The IMF bailout and the forced economic reforms of 1991 are responsible for the decades of growth, development and poverty alleviation that India experienced.
The IMF is literally a way for a country to acknowledge their mistakes and a process to get better through loans ( in a lot of cases).
Greece was especially bad for example and at the state out was then, it should have never been allowed in the EU either.
The IMF helped in return for reforms which Greece didn't really liked and isn't visible in the short term.
But it is a long term vision and not a short term one.
Greece is an example that there's no difference between the west and others. The IMF, is believe, makes no difference.
( Just my opinion)
Greece was especially bad for example and at the state out was then, it should have never been allowed in the EU either.
The IMF helped in return for reforms which Greece didn't really liked and isn't visible in the short term.
But it is a long term vision and not a short term one.
Greece is an example that there's no difference between the west and others. The IMF, is believe, makes no difference.
( Just my opinion)
> Nothing good comes from the imf ever. Especially if you're not in the west
“Global capitalist class” not “west”.
“Global capitalist class” not “west”.
As a native english speaker I found it rather trivial to parse without even trying. There's commas, which separate the couple of clauses. The direction of the sentence doesn't change or anything like that. It's not as if a comma should have actually been a semicolon. 'and shortly' could have been a new sentence but honestly it connects better with the conjunction.
'cringe' is great as it injects some emotion to an otherwise very dry and long sentence.
Your real complaint should not have been about the construction of this sentence, but at the complete failure of the article to connect bitcoin to this latest economic disaster. In fact some points of the article highlight the irrelevance. I didn't read the source article this one points to, which might actually connect the dots. This one, though, is pure clickbait.
'cringe' is great as it injects some emotion to an otherwise very dry and long sentence.
Your real complaint should not have been about the construction of this sentence, but at the complete failure of the article to connect bitcoin to this latest economic disaster. In fact some points of the article highlight the irrelevance. I didn't read the source article this one points to, which might actually connect the dots. This one, though, is pure clickbait.
They could buy back their own bonds at these discounted rates, no? It could be a good strategy to make a lot of noise about Bitcoin to crash prices and buy their own debt back cheaply.
I'm also a native English speaker, and I'm totally with you on both points.
source article which is somewhat better: https://fortune.com/2022/01/19/el-salvador-bitcoin-economy-d...
Some of the implied conclusions are intellectually dishonest, so it's quite a clickbait article, so really just skip to the last paragraph:
> The heavily indebted nation is seeking a $1 billion loan from the IMF and also courting aid from the World Bank. But Bukele's getting nowhere with both, and the IMF has strongly criticized his crusade to create the first Bitcoin-powered economy. In late November, Bukele unveiled his nuttiest idea yet, a plan to build a Bitcoin City on the Gulf of Fonseca, funded by a $1 billion bond offering, $500 million of which would be deployed to speculate in Bitcoins! Practically overnight, the price of sovereign bonds dropped from 75 cents to 63 cents of their par value, on its way to its current level of 36 cents. "El Salvador now has the most distressed sovereign debt in the world, and it's because of the Bitcoin folly," says Hanke. "The markets think that Bukele's gone mad, and he has."
Obvious money grab (wealth transfer) is seen as obvious. News at 11! The bitcoin aspect of all this is a bit of a ruse. It's the device, not the cause. Great for clicks.
Some of the implied conclusions are intellectually dishonest, so it's quite a clickbait article, so really just skip to the last paragraph:
> The heavily indebted nation is seeking a $1 billion loan from the IMF and also courting aid from the World Bank. But Bukele's getting nowhere with both, and the IMF has strongly criticized his crusade to create the first Bitcoin-powered economy. In late November, Bukele unveiled his nuttiest idea yet, a plan to build a Bitcoin City on the Gulf of Fonseca, funded by a $1 billion bond offering, $500 million of which would be deployed to speculate in Bitcoins! Practically overnight, the price of sovereign bonds dropped from 75 cents to 63 cents of their par value, on its way to its current level of 36 cents. "El Salvador now has the most distressed sovereign debt in the world, and it's because of the Bitcoin folly," says Hanke. "The markets think that Bukele's gone mad, and he has."
Obvious money grab (wealth transfer) is seen as obvious. News at 11! The bitcoin aspect of all this is a bit of a ruse. It's the device, not the cause. Great for clicks.
I’m not sure this is a crypto-specific problem, like TFA implies. Using a currency you don’t control is giving up a lot of power over your own economy. Wasn’t there a similar issue like this a few years ago in Greece because they use the Euro and couldn’t adjust to inflation because of that?
No. Greece had issues because they took on a lot of debt, and their public corruption meant they could not collect enough taxes to repay that debt.
That was the fundamental problem.
There are certain solutions to that problem that can involve devaluing your currency, which can make it much cheaper to manage the problem. And the EU could have done that, but because the EU was strongly opposed to fiscal measures at the time (that has thankfully changed since the pandemic, which has made the EU a much more useful organization), they didn't.
So a lot of people got mad at the EU about it and pretended that Greece would have been better off with their own currency to depreciate. However, there are 2 major problems with that alternate scenario:
1) If Greece was still on the Drachma, it's highly unlikely that Greece would have been borrowing money on the Drachma. They would have most likely have borrowed money in Dollars, or maybe Euros, because the Drachma was simply not powerful enough. So devaluing their currency would not have helped them with their international borrowing which was the problem in the first place (it would only have made those loans even more expensive).
2) If Greece was still on the Drachma, it's highly likely the Drachma would have collapsed, and Greece would have faced dramatic inflation, the likes of which are ruining countries like Turkey and Pakistan right now.
Think about it this way. The vast majority of wealth every Greek person in Greece would have been in Drachma. But if the value of the Drachma fell by 25%, that would mean that in one fell swoop, every Greek person lost 25% of their wealth. And currency inflation is even worse than having 95% of your net worth in your house, and seeing its price crash by 25%, because currency is what you conduct your day to day transactions in. At least with the house, assuming you don't have to pay the mortgage or you do have enough to pay the mortgage, you don't need to liquidate it at those reduced values. But if you want to buy food, you need to use currency, and so you need to realize the lowered value of your wealth immediately.
By being on the Euro, however, thanks to the fact that the value of the Euro was largely derived from other more stable countries, the Greek people did not actually lose their own personal wealth, since the Euro did not depreciate much.
That was the fundamental problem.
There are certain solutions to that problem that can involve devaluing your currency, which can make it much cheaper to manage the problem. And the EU could have done that, but because the EU was strongly opposed to fiscal measures at the time (that has thankfully changed since the pandemic, which has made the EU a much more useful organization), they didn't.
So a lot of people got mad at the EU about it and pretended that Greece would have been better off with their own currency to depreciate. However, there are 2 major problems with that alternate scenario:
1) If Greece was still on the Drachma, it's highly unlikely that Greece would have been borrowing money on the Drachma. They would have most likely have borrowed money in Dollars, or maybe Euros, because the Drachma was simply not powerful enough. So devaluing their currency would not have helped them with their international borrowing which was the problem in the first place (it would only have made those loans even more expensive).
2) If Greece was still on the Drachma, it's highly likely the Drachma would have collapsed, and Greece would have faced dramatic inflation, the likes of which are ruining countries like Turkey and Pakistan right now.
Think about it this way. The vast majority of wealth every Greek person in Greece would have been in Drachma. But if the value of the Drachma fell by 25%, that would mean that in one fell swoop, every Greek person lost 25% of their wealth. And currency inflation is even worse than having 95% of your net worth in your house, and seeing its price crash by 25%, because currency is what you conduct your day to day transactions in. At least with the house, assuming you don't have to pay the mortgage or you do have enough to pay the mortgage, you don't need to liquidate it at those reduced values. But if you want to buy food, you need to use currency, and so you need to realize the lowered value of your wealth immediately.
By being on the Euro, however, thanks to the fact that the value of the Euro was largely derived from other more stable countries, the Greek people did not actually lose their own personal wealth, since the Euro did not depreciate much.
If they managed to pay their debts by printing money, and it causes the wealth of all individuals to decrease by 25% due to inflation, that’s sort of the same result as if they’d been able to collect the taxes instead.
Printing money/inflation is a tax.
Printing money/inflation is a tax.
But using Euro suddenly increased labour cost, they lost a critical advantage.
A person working in Greece or Portugal isn't payed the same amount of money as one in Germany or the Netherland nor the cost of living is the same. In some cases small "poorer" countries might actually have a critical advantage. In labour intensive industries that have Northern European clients it can be impactful. Of course there are several othet factors that have to be taken into account though.
Not exactly, but you are close enough. Greece may or may not have fudged the numbers in reports to the EU institutions so they could adopt the euro in the first place and then it backfired spectacularly.
That aside, I fully agree with you. Don't use currencies for your economy if you can't exert at least some control on them. *Especially* not crypto currencies that are essentially controlled by noone.
Using another states currency at least gives you some set of guarantees because they don't want to blow their own economy, but with crypto that isn't really the case.
That aside, I fully agree with you. Don't use currencies for your economy if you can't exert at least some control on them. *Especially* not crypto currencies that are essentially controlled by noone.
Using another states currency at least gives you some set of guarantees because they don't want to blow their own economy, but with crypto that isn't really the case.
I encourage anyone with curiosity to look into the roll out of Bitcoin in El Salvador. https://www.youtube.com/watch?v=P1cIH1ZB70o
Compare with what is going on in St. Kitts with a similar crypto rollout.
Compare with what is going on in St. Kitts with a similar crypto rollout.
What is your conclusion from that video? He posted another one which is more balanced [1], but even in that video he pushes the usual bitcoin talking points like protection from inflation which don't make much sense when the underling asset is very volatile.
[1] https://www.youtube.com/watch?v=M5dYJAZ2zPM
[1] https://www.youtube.com/watch?v=M5dYJAZ2zPM
It isn't surprising that some countries would rather have an economy at the mercy of the unpredictable volatility of Bitcoin instead of having an economy at the mercy of the predictable actions of the IMF and the US government.
They are literally the ones asking the IMF for a billion $?? I’m always amazed when people are mad about transaction details they themselves initiated. Duh, if you need $1b, the creditors need some assurances you’re actually able to repay?
Another hit piece article. I think on the ground it’s going better than this is reporting. El Salvador doesn’t need the IMF, they are going to crowd fund their sovereign bonds. Should be interesting!
> Salvador doesn’t need the IMF
Yet they are asking the IMF for a billion dollar loan.
Yet they are asking the IMF for a billion dollar loan.
Cambodia moved its banking infrastructure to block chain without changing its currency and it’s awesome. Free and instant mobile transactions between banks.
We have instant transactions in Australia between major banks using mobile too and as far as I am aware we didn't need a block chain.
I’m American so this is magic to me.
When I was in the US several years back, I was amazed how poor your mobile service was and how poor payments was. Looks like it hasn’t changed.
Where can read more about this? I don’t see why blockchain would be necessary to handle transactions between trusted entities (like banks).
I heard that behind the scenes they were actually using Algorand.
It's economy was bad before. And they didn't switch, just got some adoption.
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Wasn’t it floundering before?
This is an unsurprising turn of events. Yet somehow some people will still be surprised.